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GAIL declares war on IndianOil pipeline plans

Vol 20, PW 6 (01 Dec 16) Midstream & Downstream

GAIL clearly feels threatened by IndianOil's move into LPG pipelines and is making a fuss yet again about a proposed 3.75m t/y project from IOC's Kandla terminal in Gujarat to Gorakhpur in Uttar Pradesh.

With a planned length of 1987-km, IOC's proposed LPG pipeline would be the longest in the country and one of only a few the company has. But GAIL executive director Manoj Jain wrote to the PNGRB on October 31 stressing that its own Jamnagar to Loni (JLPL) pipeline along a similar route is under-used, making a new pipeline unnecessary.

Jain adds capacity is being raised from 2.5m t/y to 3.25m t/y by December 2017 and can be raised further to 5.2m t/y. But for three years it has seen a 400,000 t/y shortfall in throughput because of shutdowns at IOC's Kandla import facility and reduced supplies from Reliance's Jamnagar refinery.

"Capacity underutilisation will be aggravated, leading to losses to the national exchequer if duplicate infrastructure is created," writes Jain. GAIL believes demand is better served if its own pipeline capacity is incrementally increased for just Rs4000cr ($582m) compared to the Rs5000cr ($727m) cost of IOC's proposal.

More, IOC needs new RoU clearances which might cost much more due to "difficult" terrain. GAIL by contrast has RoU permission to increase JLPL capacity and lay spur lines.

GAIL opposed a similar IOC proposal in 2012 but IOC re-submitted the idea on September 29, 2016.

HPCL ironically wrote to the PNGRB on October 28 that IOC's proposed 3.75m t/y capacity is much less than actual demand of around 8m t/y. HPCL also complained the channel at IOC's Kandla terminal has inadequate draft and requires continuous dredging and the terminal cannot berth Very Large Gas Carriers. Further, HPCL said state-owned oil companies should operate the pipeline jointly as agreed in principle. Bharat Petroleum complained state-owned companies are "struggling" to feed JLPL to full capacity and the pipeline should connect to other ports besides Kandla. It agreed that the pipeline should be a joint venture. Reliance wants the entire pipeline and storage points along its route declared a common carrier to meet the government's objective of boosting LPG use. Adani wants the IOC pipeline linked to its own upcoming LPG import terminal at Mundra and reminded the PNGRB it will be feeding LPG into JLPL. Aegis, Gujarat Chemical Port Terminal and Gujarat Pipavav Port want the IOC pipeline connected to their established Gujarat LPG terminals while Energy Infrastructure India wants the pipeline connected to its upcoming 2.5m t/y Okha LPG terminal in Gujarat.

HPCL ironically wrote to the PNGRB on October 28 that IOC's proposed 3.75m t/y capacity is much less than actual demand of around 8m t/y. HPCL also complained the channel at IOC's Kandla terminal has inadequate draft and requires continuous dredging and the terminal cannot berth Very Large Gas Carriers. Further, HPCL said state-owned oil companies should operate the pipeline jointly as agreed in principle. Bharat Petroleum complained state-owned companies are "struggling" to feed JLPL to full capacity and the pipeline should connect to other ports besides Kandla. It agreed that the pipeline should be a joint venture. Reliance wants the entire pipeline and storage points along its route declared a common carrier to meet the government's objective of boosting LPG use. Adani wants the IOC pipeline linked to its own upcoming LPG import terminal at Mundra and reminded the PNGRB it will be feeding LPG into JLPL. Aegis, Gujarat Chemical Port Terminal and Gujarat Pipavav Port want the IOC pipeline connected to their established Gujarat LPG terminals while Energy Infrastructure India wants the pipeline connected to its upcoming 2.5m t/y Okha LPG terminal in Gujarat.